I make no bones about it -- I consider Discovery Holding Co.
As background, Discovery Holding was spun off from Liberty Media
If you have any interest at all in this stock, you know that until recently, Discovery Holding shared ownership of Discovery Communications with Cox Communications and Advance/Newhouse. Discovery Holding had 50% while the other two companies split the remaining 50%. The recent big news was Discovery Communications' plan to buy Cox's 25% stake with $1.3 billion in cash as well as throwing in Travel Channel-related properties. Going forward, Discovery Communications will have two stakeholders of Discovery Holding and Advance/Newhouse, who retain ownership with two-thirds and one-third, respectively.
There is a lot of speculation brewing as to whether Advance/Newhouse can be coerced into selling its chunk as well.
First-quarter "comprehensive" earnings at Discovery Holding increased 48% to $22.3 million, or $0.07 per share. This includes $21.6 million related to Discovery Holding's then-50% share in Discovery Communications. Furthermore, Discovery Holding's consolidated revenue increased by 13%. Taking a peek at operating income, one might notice that Discovery Holding reported a loss of $1 million in the quarter, but Discovery Communications' total operating income was $122 million.
The biggest element here, of course, seems to surround the fact that Discovery Holding is increasing its stake in Discovery Communications. It's easy to see that owning more of Discovery Communications should be a boon to Discovery Holding.
For further insight into this complex investment, look no further than Motley Fool Inside Value. Jim Cramer may have recently lauded Discovery Holding on his show, but longtime Fool Bill Mann recommended Discovery Holding in October 2005 as a guest analyst for Inside Value, and subscribers who bought at that time have experienced more than 50% share price appreciation.
Working up a valuation for this entity is a complicated procedure, but the smart folks on the Discovery Holding discussion board at The Motley Fool recently did some valuation work -- and drummed up related discussion -- inspired by the transaction with Cox. (Take a 30-day free trial to take a look, and get in on the discussion.) However, complicated or not, it seems that Discovery Holding is going to have an interesting year as the strengths of the entity may come a bit clearer to potential investors.
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